côte d’ivoire · 30october2005 was postponed, and laurent gbagbo’s tenure as president of the...

Côte d’Ivoire

Yamoussoukro

key figures• Land area, thousands of km2 322• Population, thousands (2005) 18 154• GDP per capita, $ PPP valuation (2005) 1 503• Life expectancy (2000-2005) 46• Illiteracy rate (2005) 46.3

African Economic Outlook 2005-2006 www.oecd.org/dev/publications/africanoutlook

www.oecd.org/dev/publications/africanoutlook

Côte d’IvoireAll tables and graphs in this section are available in Excel format at:

http://dx.doi.org/10.1787/264758300201

African Economic Outlook© AfDB/OECD 2006

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THANKS TO ITS RELATIVE ECONOMIC PROSPERITY,observed until recently in steadily positive growth rates,Côte d’Ivoire was for a long time the main developmenthub of the subregion. For several years now, however,the country has been in deep crisis, and this has distinctlyaffected its economy and social cohesion. At the rootof the crisis lie several causes, including poorly controlledimmigration, the absence of a real policy to manage landassets and the fragility of the country’s institutionaland democratic governance systems. For the past threeyears, Côte d’Ivoire has been divided in two as a resultof a civil war that began in September 2002. The southis under government control, and the north is in thehands of the Forces Nouvelles, as the armed rebellionhas called itself. Though a number of agreements aimedat resolving the situation have been signed by bothsides, today each party is entrenched in its positionand the country is at a political impasse.

In 2003 and 2004, Côte d’Ivoire recorded negativegrowth of respectively -1.6 per cent and -1.7 per cent.In November 2004, increased tensions led manyeconomic operators, particularly French ones, to leave

the country and resulted in the closure or relocationof a large number of companies. This had a disastrouseffect on the economy. In 2005, the mediation of thePresident of South Africa, ThaboMbeki, widely supported by theinternational community, marked aturning point. Mbeki reinvigorated thereconciliation process initiated in 2003 in Linas-Marcoussis (France); this led to the signing ofagreements, which all sides are finding it difficult torespect. The South African mediation notably allowedseveral roadblocks to be lifted: the time chart definedin the National Disarmament, Demobilisation andReintegration Plan (PNDDR) was ratified, thepresidential election initially scheduled for30 October 2005 was postponed, and Laurent Gbagbo’stenure as president of the republic was extended for aone-year transition period in accordance with theAfrican Union decisions of October 2005. During theinterim period, the president was to co-operate with aprime minister who was granted enlarged powers.According to the road map of the new head ofgovernment, reconstruction of the country was to begin

The economic outlook is poor due to military and political tensions.

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Figure 1 - Real GDP Growth and Per Capita GDP($ PPP at current prices)

Source: IMF and Institut national de la statistique (INS) data; estimates (e) and projections (p) based on authors’ calculations.

African Economic Outlook © AfDB/OECD 2006

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in 2006, following expected disarmament andreunification. Uncertainty, however, continued to hoverover the country. Indeed, the intentions of the politicalplayers of the peace process were not always clear fromtheir behaviour.

At the end of the 2005 financial year, the economicoutlook remained fairly discouraging. Political instabilityand the suspension of external financing hamperedthe government’s growth objectives. As a result, theprojected 1 per cent growth was unattainable, andGDP growth was expected to be -1.2 per cent in 2005.Development of the economy in 2006 hinges on theresolution of the political issues. If the climate improves,the country could rebound to positive 0.4 per centgrowth.

Recent Economic Developments

The economy of Côte d’Ivoire is primarilydependent on its agriculture: traditional export crops,particularly cocoa and coffee, other export crops suchas palm oil, hevea, pineapple, sugar cane, cotton,bananas, etc. and food crops such as plantains, yams,and cassava, among others.

Some estimates suggest that the coffee-cocoa sectorwas less profitable in 2005 than in the previous year,when the two crops accounted for a significantproportion of export revenue (40 per cent in 2004).The 2004/05 cocoa harvest yielded 1.3 million tonnes,compared with 1.4 million in 2003/04. Concentratedin the south and south-east of the country, cocoaproduction suffered less from the crisis. Overall, cocoaheld up well in the 2003/04 and 2004/05 seasons.This can be explained by the measures taken to protectthe transport corridors between the production zonesand the country’s ports (Abidjan and San Pedro),permitting exports to continue. Despite the crisis, Côted’Ivoire has remained the world’s leading cocoa producer.The sector comprises almost 620 000 holdings andindirectly or directly provides a livelihood for nearly6 million people. According to interim data for coffee,during the five principal harvesting months, productionwas 10 325 tonnes for the 2004/05 season, as compared

with 58 948 tonnes for the same period of the previousseason.

The relative decline in production in the coffee-cocoa sector is attributable to somewhat less satisfactoryclimate conditions, compounded by crisis-related factorsand institutional factors. The events of November 2004generated a mass exodus of migrant workers from thecocoa belt. The numerous roadblocks (allegedly forself-defence) and police road stops considerablylengthened the transport time for goods conveyed byroad. Among the institutional constraints that hamperedthe sector were disagreements between traders and theregulator of the sector, the deterioration of port storagefacilities and problems in providing services forexpanding plantations. Another impediment was theDroit unique de sortie (DUS) export tax levied by thestate of Côte d’Ivoire, which provides the latter with asignificant source of revenue. Taxes on cocoa, thebulwark of the Ivorian economy, are currently nearly40 per cent of the export price. Through the DUS,20 per cent of these go to the state, and 20 per cent tothe various managing bodies of the sector (the coffeeand cocoa regulation authority, Autorité de régulationdu café et du cacao [ARCC]; the coffee and cocoaexchange, Bourse du café et du cacao [BCC], theregulatory fund, Fonds de régulation et de contrôle[FRC]; the coffee and cocoa producers’ developmentfund, Fonds de développement des activités desproducteurs de café et cacao [FDPCC], bagging, etc.).This high level of taxes has a negative effect on thegrower price of cocoa, which would require revising thecurrent DUS. The tax burden also explains why a largepart of cocoa production is smuggled out of the countryto neighbouring Ghana, which gives planters higherprices.

The liberalisation reforms introduced in the coffee-cocoa sector in October 2002 had three goals: to enddirect government intervention and all direct or indirectfinancial support of the cocoa trade; to obtain adequacybetween world prices and producer prices and; to securethe efficiency of competition. The current organisationof the cocoa sector, however, lacks clarity, due notablyto the overlapping of the various competent institutions.In addition, producer co-operatives suffer from both


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lack of resources and the inability to obtain a larger shareof the market, the minimum price having become amere guiding price.

In the coffee sector, although in January 2005 theBCC had fixed the producer price at the same level asin 2004 (225 CFA francs/kg), it climbed from 230 CFAfrancs/kg at the start of the commercial year to 360 CFAfrancs/kg in April 2005. This increase, however, had

no significant effect on either the efforts made inplantations or on the planters’ return. Some, believingthis improvement to be temporary, remained reluctantto return to their fields.

Cotton-fibre production in the 2004/05 seasonamounted to 344 000 tonnes, up from 300 000 tonnesin 2003/04. The cotton sector, which up to the eve ofthe crisis had contributed significantly to Côte d’Ivoire’s

Agriculture, forestryand fisheries

Export crops

Industry

Construction

Services

Government services

Other services

Transport, communicationsand trade

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Figure 2 - GDP by Sector in 2004 (percentage)

Source: Authors’ estimates based on INS data.

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Export crops

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Construction

Transport, communications and trade

Business and financial services

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Others

GDP at market prices

Figure 3 - Sectoral Contribution to GDP Growth in 2004 (percentage)

Source: Authors’ estimates based on INS data.


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export revenue, is now in a complex and difficultsituation. While production is overwhelmingly locatedin the north of the country, under the control of theForces Nouvelles, processing and transformationactivities, in addition to export routes, are in thegovernment zone. Other factors disrupting the sectorinclude: problems in the supply of plant-protectionproducts, bank closures in the production zones, thefragile financial state of the main processing companies,increased transaction costs arising from transportdifficulties and road levies imposed by the rebels, etc.To these must be added the massive flight of Ivoriancotton to neighbouring Burkina Faso and Mali, bothlarge producers of “white gold”, where it is better paid.Sector professionals estimate that 220 000 tonnes, or55 per cent of national production were diverted to thesetwo countries in 2004. Planters state that they can get210 CFA francs/kg in Burkina Faso, compared with160 to 180 CFA francs/kg on the national market.

Prior to the war, cotton producers sold their harvestdirectly to ginning factories, including the CompagnieIvoirienne de Développement du Textile (CIDT) andIvoire Coton. The war economy and the absence ofbanks in the north, however, brought about theemergence of new middlemen who buy cotton fromsmall farmers for 120 CFA francs/kg and sell it for220 CFA francs/kg in Mali or Burkina Faso. Currently,only Ivoire Coton is paying producers. Other ginningcompanies, having accumulated arrears, give the newmiddlemen an advantage as, though they pay very lowprices, they pay cash. To end these earning shortfalls,it is urgently imperative to reorganise the cotton sector.The Ivorian economy could benefit greatly from thisrehabilitation. In this regard, the Ministry of Agriculturerecently undertook a mission to Korhogo, in the north,to assess the trading conditions in the sector and to dealwith the problem of outstanding payments to growers.Again, however, the obstacles linked to the division ofthe country, particularly the absence of government inthe north, may impede effective reorganisation of thesector. Only the end of the political crisis in the countrywill effectively enable the rehabilitation of cotton.

Mining-sector activity remained steady in 2004thanks to the continued expansion of oil extraction

(8 124 billion barrels, 8.2 per cent more than in 2003)and to increases in gas production. Although the Itymine, which had been closed in 2002, was reopened,gold production (1 219 kg) was no greater than theprevious year. No figures relating to diamond productionare available due to its location in the regions controlledby the Forces Nouvelles.

As political turmoil built up in late 2004, thesecondary sector as a whole paid a high price for thecrisis. Growth is likely to stagnate in 2006. The textilesector should be mentioned among the affectedactivities: its main production units, which are in therebel stronghold region of Bouaké, are closed. In thesouth, the few factories of the sector have to cope withunfair competition from illegal imports, such as forexample that of cheap sugar from Asia entering thecountry via Burkina Faso. The Société Ivoirienne deRaffinerie (SIR), the national oil refinery, lost100 000 tonnes of its annual market share in oil refiningin the north of the country to the benefit of Malianand Burkinabe suppliers.

The tertiary sector has been by far the worst hit bythe crisis. In 2004, it contracted by 0.5 to 1 per cent,with a 5 per cent drop in the overall activity of servicecompanies. It is paying not only for direct and indirectwar damages, but also for the policy of closing orrelocating certain companies in the subregion. Everybranch of the sector recorded significant decreases.Retail sales, for example, fell by 0.6 per cent overall inthe course of 2004. This drop was due to the lowerincome of households affected by the closure of factories,technological unemployment and the departure ofexpatriates. The Central Bank of West African States(BCEAO) trade index was estimated at 1 per cent for2004. Hotels and restaurants are in deep trouble dueto the departure of expatriates and the absence oftourists, as are both the insurance and constructionsectors. In this context, even employers are encouragingthe companies still operating to take advantage ofopportunities in the informal economy. The tertiarysector is likely to suffer the longest from the crisis.

Private investment stagnated in 2004 comparedwith 2003, and it contracted in 2005. This situation


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will probably continue in 2006 and 2007 as a resultof the uncertainty of the electoral process. Despite theevents of 2004, private consumption rose in 2004 and2005 and should be stable in 2006 and 2007. Theincrease in the fiscal deficit as a percentage of GDP in2004 stimulated growth, but the decrease in the surplusin the balance of payments on goods and servicesweakened growth. The fiscal deficit increased furtherin 2005, and the balance of payments also improved.All of these factors were thus positive for GDP growthin 2005.

Owing to the uncertainty related to the mobilisationof the foreign resources essential for financinginvestments, and given the deadlock in resolving thepolitical conflict, final public consumption was expectedto fall in 2005. It could, nevertheless, rise slightly in2006 if the nomination of the prime minister and theformation of his government, as well as the October2006 elections, bring about the expected stability. Finalpublic consumption was expected to fall from 14.2 percent of GDP in 2004 to 13.9 per cent in 2005, beforerising slightly in 2006 to reach its 2004 level. Finalprivate consumption should also rise marginally in2004 and 2005 and could become stable in 2006.Investment, both public and private, should shrink,given the difficulties of foreign financing and thehesitancy in the private sector. Normalisation of thesocial and political situation is key to restoringconfidence among economic players, notably amongforeign investors. If the elections take place as expected,there could be a gradual recovery of private investmentin 2006 and 2007 (see Table 1).

Macroeconomic Policies

Fiscal Policy

The 2005 budget, approved by parliament in April2005, provides for a drop in both receipts andexpenditure. Its priorities remained the same as in2004: disarmament, reunification of the country andthe organisation of elections as guarantees for nationalreconstruction and economic recovery. Exceptionalexpenditure connected to the “peace effort” wasbudgeted. As much as 6 billion CFA francs wasearmarked for restructuring public administration and1.2 billion CFA francs for implementing the Linas-Marcoussis Agreement. In addition, significant expenseswere planned for the “cost of the crisis”, includingbonus wages for front-line soldiers (30 million CFAfrancs). Funds were also provided for organisation ofthe presidential election: to identify the population,prepare consultation of the electorate and finance thepolitical parties. Based on a 1 per cent growthassumption, the 2005 budget is presented as almostbalanced at 1 735 billion CFA francs. Internal resources(82 per cent of the budget) are estimated at1 420 billion CFA francs, including 1 258 billion intax receipts (compared to 1 263 billion CFA francsvoted in 2004 and respected on the whole 25 billionin grants), 122 billion in non-tax revenue and 40 billionfrom borrowing on the financial market. Tax receiptsand grants continued practically at their 2004 level, thatis, 18.5 per cent of GDP. They should remain stableat that level throughout 2006 and 2007, assuming thatthe political situation is maintained.

Table 1 - Demand Composition (percentage of GDP)

Source: INS data; estimates (e) and projections (p) based on authors’ calculations.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Gross capital formation 14.7 11.0 9.8 9.4 8.7 8.9 9.1Public 5.5 3.3 2.7 2.3 2.0 2.1 2.3Private 9.3 7.7 7.1 7.1 6.7 6.7 6.8

Consumption 76.2 69.7 75.6 81.0 87.1 87.2 86.7Public 11.0 12.3 13.4 14.2 13.9 14.1 14.0Private 65.2 57.4 62.1 66.8 73.2 73.1 72.7

External sector 9.1 19.3 14.7 9.6 4.2 4.0 4.3Exports 38.3 46.5 43.3 45.7 44.0 44.5 43.7Imports 29.3 27.1 28.6 36.1 39.8 40.5 39.4


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Recurrent expenditure recorded a slight drop, from1 006 billion CFA francs in 2004 to 990 billion in 2005.It was supposed to be essentially devoted to paying thewages of civil servants and to the remainingadministrative costs, including exceptional costs relatedto the crisis. This decline should continue in 2006 and2007 (see Table 2). Investment expenditure came in at177 billion CFA francs, compared with270 billion scheduled in the 2004 budget, 168 billionof which were realised. Of this amount, 94.9 billionwere allotted to the national reconstruction programme,21.3 billion to decentralised management, and 4 billion

to revising the electoral register and the population-identification plan. The sector breakdown of budgetaryallocations shows that seven departments take up morethan 85 per cent of the budget, excluding debt servicing.These are public education (28.2 per cent of the total),the economy and finances (17.7 per cent), defence(13.1 per cent), health (7.4 per cent), higher education(7 per cent), economic infrastructure (6.1 per cent) andsecurity (6 per cent). The incompressible expenditureintended for the return of peace will limit the investmentcapacities of technical ministries all the more. Thedefence budget amounts to 38.5 billion CFA francs.

To the extent that the government is still facingfinancial difficulties that restrict its ability to honourthese commitments, implementing this budget will becomplex.

The collapse of some sectors of the economy andthe closure of many small and medium-sizedcompanies (SMEs) have damaged the domestic taxbase, forcing the government to depend primarily onthe tax levies on cocoa. During the first months of2005, however, an attempt was made by thegovernment to increase taxes on several goods andservices, for example in the sector of transport inurban areas and in that of poultry imports. This hadlittle effect on public finances and, in addition, ledto threats of strikes in the affected sectors. Otherfactors have been obstacles to increases in the domesticrevenue. Several SMEs practice tax evasion, which is

on the rise; they perceive this as a way of remainingin business during the crisis. As for exporters, they willbe able to benefit from a VAT reduction on goods andservices. For pineapple producers, the rate of thewithholding tax on sales profits has been reducedfrom 2.5 per cent to 1 per cent. The Société desTransports Abidjanais (SOTRA), finally, has beenexempted from VAT and customs duties on itsacquisition of goods until December 2007.

On the whole, the situation of companies hasworsened. In its fiscal policy, the government has thusprovided for a range of measures aimed at rebuildingtrust and stimulating business. It has established aclassification system distinguishing totally or partiallydamaged companies from those indirectly affected(whose turnover dropped by at least 50 per cent in thelast quarter of 2004). Depending on the classification,

Table 2 - Public Finances (percentage of GDP)

a. Only major items are reported.Source: Central Bank data; estimates (e) and projections (p) based on authors’ calculations.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Total revenue and grantsa 20.2 18.4 17.6 18.5 18.5 18.4 18.2Tax revenue 16.4 15.9 15.0 15.2 15.6 15.6 15.3Grants 0.6 0.4 0.5 0.9 0.5 0.3 0.5

Total expenditure and net lendinga 22.0 19.9 20.2 20.4 19.2 19.3 19.4Current expenditure 16.5 16.5 17.4 17.7 17.0 16.8 16.8

Excluding interest 12.0 13.2 14.7 15.4 15.1 15.3 15.2Wages and salaries 6.0 6.5 6.8 6.7 6.6 6.4 6.2Interest 4.5 3.3 2.7 2.3 1.9 1.6 1.6

Capital expenditure 5.5 3.2 2.7 2.6 2.2 2.4 2.5

Primary balance 2.7 1.8 0.1 0.4 1.2 0.6 0.4Overall balance 1.8 1.5 2.6 1.8 0.7 0.9 1.2


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specific tax regimes (often including exemptions) areapplied, in particular to fixed taxes and profit taxes, andto employers’ contributions of end-2004 and 2005.

Monetary Policy

Monetary policy is conducted regionally by theBCEAO. Its primary objectives are to maintain paritybetween the CFA franc and the euro and to controlinflation in the zone. The policies implemented by theBCEAO track those of the European Central Bank(ECB). The few divergences observed in BCEAO andECB rates occur because for its members, the BCEAOtakes into account their economic situation, the inflationrate and the liquidity of the banking sector. The inter-bank rate in 2005 was estimated to be unchanged, at4.88 per cent, reflecting the stability of the quarterlyinter-bank rate in the euro zone (2.1 per cent). In2006, interest rates could increase if euro-zone interestrates rise to 2.2 per cent.

Despite the major disruptions to the economy,inflation was controlled, going from an average of1.4 per cent in 2004 to 2 per cent in 2005. This wasdue to several factors: first was the good supply of foodto the market and a rigorous monetary policy conductedby the BCEAO. In addition, consumers adapted theirbehaviour to the crisis by reducing their spending andbuying more local products. Trade in basic foodstuffswas sustained, and no food shortages were noted. Theslight rise in inflation was primarily due to increasedelectricity prices and transport costs. The rise ininternational oil prices affected the inflation rate bothdirectly and indirectly in 2005, but inflation shouldremain within the limits of the West African Economicand Monetary Union (WAEMU) convergence criteria,that is, 3 per cent annually. In 2006, inflation couldbe around an annual average of 3 per cent.

External Position

The economy of Côte d’Ivoire, which relies largelyon its agricultural exports, is characterised by a positivetrade balance, but which has been declining since 2002.Control of the cocoa production in the midst of thecrisis constituted a considerable benefit in the structure

of the balance of trade. In 2005, exports recoveredslightly compared with 2004.

Cocoa accounted for one-third of all exports in2004 with 1 061 000 tonnes of bulk cocoa and276 000 tonnes of processed cocoa, equal to345 000 tonnes of beans. Bulk cocoa accounted forthree-fourths of the country’s agricultural exports, whileprocessed cocoa accounted for two-thirds of processed-food exports. Oil exports are rising. Refined oil increasedparticularly in 2004, following the resumption of oil-refining activities in the country. They increased by38 per cent in volume and 64 per cent in value. Oil-product exports (including crude oil) thus recovered,in both volume and value, their 2000 level, totallingalmost 15 per cent of exports, or 640 357 million CFAfrancs. Jet oil, gas oil and crude oil made up three-fourths of all Ivorian oil exports. The primarydestinations for the refined products were Nigeria andthe United States, which respectively accounted for35 per cent and 14 per cent of the total volume. Côted’Ivoire thus reasserted its industrial and export power,and its role in regional energy supply.

Imports to Côte d’Ivoire rose in 2005 comparedwith 2004. Automobile imports increased byapproximately 65 per cent in value. This rise was ofgreater benefit to used-car imports, which accountedfor two-thirds of registered vehicles. Medicine was thethird largest import item according to the integratedtariff of the European Communities (TARIC) ten-digit system, after oil and rice. It increased by 14 percent to 79 873 million CFA francs. Crude oil (with20 per cent of total imports) remains the leading importitem of the country. The 14 per cent rise in volume andthe jump in oil prices raised the bill by 76 per cent.These imports were met by Nigerian production.

Aggregate trade with the 25 member countries ofthe European Union (EU-25) reached2 275 billion CFA francs. The EU-25 accounted for42 per cent of supplies to Côte d’Ivoire. The EconomicCommunity of West African States (ECOWAS), on itspart, accounted for 25 per cent of aggregate trade, or1 308 billion CFA francs, with a trade surplus of236 billion CFA francs for Côte d’Ivoire. France


remained the leading trade partner. It was its secondsupplier, overtaken slightly by Nigeria. In 2005, Ivorianimports rose slightly, going from 25.8 per cent to29.3 per cent of GDP. This trend should continue in2006. In terms of exports, there was a slight fall in2005, from 43.3 per cent of GDP in 2004 to 41.6 percent. Still, if all parties adhere to the peace process,exports should improve in 2006 (Table 3).

In 2005, economic operators in Côte d’Ivoireadopted an attitude of caution waiting for thepresidential election. In November 2004, they hadalready seen the upheaval wipe out most of the gainsfrom that year’s recovery of industrial activity.

Consumption thus slowed in 2005. If the peace processunfolds well, 2006 should be an improvement over2005. Nonetheless, the institutional and organisationalproblems faced by the cocoa sector and the lowremuneration of farmers (due to weak world prices) haveimperilled the 2004/05 harvest. This latter has provedto be less prosperous than previous years, compoundingthe decline in cocoa revenues. The persistent smugglingof cocoa to Ghana in response to the sustained pressureon grower prices only makes these problems worse.Provided that oil prices remain very high, the rise inoil exports should, however, compensate the state forthe reduction of cocoa revenues and could account fora significant share of the country’s revenue. Thus, export

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Table 3 - Current Account (percentage of GDP)

Source: Central Bank data; estimates (e) and projections (p) based on authors’ calculations.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Trade balance 11.4 24.1 18.5 17.5 12.3 12.1 12.3Exports of goods (f.o.b.) 35.0 44.5 40.9 43.3 41.6 42.0 41.3Imports of goods (f.o.b.) -23.6 -20.4 -22.4 -25.8 -29.3 -29.9 -28.9

Services 5.5 8.4 8.1 8.2Factor income 7.0 5.5 4.8 4.5Current transfers 3.2 4.0 3.5 3.0

Current account balance 4.2 6.2 2.0 1.8

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Figure 4 - Stock of Total External Debt (percentage of GNI)and Debt Service (percentage of exports of goods and services)

Source: IMF and World Bank.


revenue is expected to rise in 2005 to 6 billion dollars.Finally, the surplus in the Ivorian trade balance shouldimprove if the country is reunified.

Côte d’Ivoire means to attract internationalinvestment by improving the business environment. Itis planning to reinforce public-private partnershipsand to implement an investment code that willguarantee legal security and the security of goods andpeople. In 2002, according to the United NationsConference on Trade and Development (UNCTAD),the country was not among the African states mostaffected by the overall regression of foreign directinvestment (FDI). Ranking 78th in the list of countriesreceiving the most FDI in the world, it is in 4th placeamong sub-Saharan African countries, behind SouthAfrica, Angola and Nigeria. The economy shows signsof vitality and offers many diversification opportunities.These include private-sector projects supported bymultiple partners, such as the construction of theChinese embassy and the inauguration of that of theUnited States in August 2005. The country thus meansto diversify its partners while continuing to rely onFrance, its historical partner.

The deterioration of the country’s external financialposition runs the danger of casting doubt on thefinancial aid of the Bretton Woods institutions and ofjeopardizing the reactivation of the debt-reductionprocess under the Heavily Indebted Poor Countries(HIPC) Initiative. This deterioration is characterisedby an accumulation of arrears of payment due to thefailure of meeting obligations to public and privatecreditors. The latest relief granted to Côte d’Ivoire goesback to April 2002. Marking the resumption of financialco-operation with its external partners, $911 millionof debt were cancelled and debt servicing was reducedfrom $2.26 billion to $750 million between 1 April2002 (date of the agreement with the Paris Clubpartners) and 31 December 2004. The debt reductiongranted by foreign creditors required Côte d’Ivoire tocomply with the three-year Poverty Reduction andGrowth Facility (PRGF) Arrangement negotiated withthe International Monetary Fund (IMF). This shouldhave enabled further relief once the decision point ofthe HIPC Initiative had been reached. The process

was, however, put on hold because of the crisis. At theend of 2003, the external debt of Côte d’Ivoireamounted to $12.2 billion, including $733 million inarrears of payment accumulated between 2002 and2003. Multilateral debt accounted for approximatelyone-third of this total, more than 60 per cent of whichwas held by the World Bank. Members of the Paris Clubheld about two-thirds of bilateral debt, and thecommercial banks in the London Club held the balance.In 2004, foreign debt equalled about 80 per cent ofGDP, and debt servicing about 7.8 per cent of goodsand services exports. Once again, the resumption offinancial co-operation with Côte d’Ivoire remainsdependent on the normalisation of the political situationand the agreement of all creditors concerned.

Structural Issues

Recent Developments

Côte d’Ivoire has always built infrastructure incompliance with international standards.Telecommunications services are good and include apublic data network. New Information andCommunication Technologies (NICTs) are indisputablypart of the country, with a SAT-3 landing point in2005, Internet access and several long-distancecommunication centres. Land-line telephony has beenliberalised. Mobile telephony is growing strongly, withtwo large competitors – Orange and Telecel – sharingthe market. In 2005, MTN, a South African telephoneprovider, entered the country and should become aserious competitor in the coming years. In 2004, thissector counted 1.5 million consumers. A newtelecommunications code was promulgated in 2005.Infrastructure development has transformed Côted’Ivoire, both commercially and industrially, into amodern state. The economic capital, Abidjan, however,which was considered the business centre of WestAfrica, has lost its place due to the crisis. Trade in thesubregion now takes place via Senegal, Togo and Ghana.

The Ivorian education system, which complies withregional standards, includes international institutionswith programmes based on those of excellent American

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and French schools. However, many have had to closesince November 2004. The recent economic andpolitical problems have also delayed scheduled publicinvestments. The project to set up a biotechnologyand NICT free zone has not yet been started up, despitethe fact that it would open non-negligible investmentopportunities. Even though the government had maderural electrification a priority – seeking to connect200 villages to the national network each year –a greatmany are still not equipped. Currently, approximately25 per cent of the rural population has access toelectricity, compared with 77 per cent in urban areasand 88 per cent in Abidjan. Here again, for infrastructuredevelopment to resume and Côte d’Ivoire to fulfil itspotential of leading economy in the subregion, thereturn of political stability is absolutely essential.

The November 2004 hostilities were a backgroundfor looting that resulted in the destruction or closureof more than 150 SMEs, mostly held by the Frenchcommunity. A good number of Ivorians lost their jobsin the process. According to the Côte d’Ivoire Chamberof Commerce, some 30 000 jobs were lost in the spaceof a week. Even prior to these events, unemploymentfigures were not encouraging. Statistics from the nationalsocial welfare fund, the Caisse nationale de prévoyancesociale (CNPS), show that the 41 000 companiesregistered in the country employed only 478 000 of the18 million Ivorians. Almost 64 per cent of thepopulation is under 24 years old, and many youngpeople are unemployed. To assist companies that werepartly or totally destroyed, the state adopted special taxmeasures. These include, among others, employercontribution exemptions for the entire 2005 businessyear for all affected companies, VAT exemption onfixed assets that were destroyed, exemptions to fixedtaxes as well as on profits and on employer taxes of end-2004 and 2005. These reforms should allow manyeconomic operators to stabilise their finances.

The institutional and financial system for SMEs ismaintained by several organisations: the Ivorian businessinstitute, Institut Ivoirien de l’Entreprise, (INIE); themanagement centre, Centre de Gestion Agrée (CGA);and the Ivorian national business development fund,Fonds Ivoirien pour le Développement de l’Entreprise

Nationale (FIDEN). Financial services for SMEs aremostly provided by an SME guarantee fund, the Fondsde garantie aux PME (FGPME). It is active in thesphere of all economic activities and offers a guaranteeto financial institutions of 70 per cent of the projectcost to a limit of 150 million CFA francs. Credit linesin secondary banks exist as an alternative to financingfrom international institutions. Access to bankingservices remains difficult, however. Financial institutionsare also increasingly reluctant, given the high commercialrisk associated with the political turmoil and theasymmetry of information.

In Côte d’Ivoire, the financial sector is in anoligopolistic situation. The large banks and new players(for example, the Bank of Africa) are attempting toexpand to ensure access to banking services. The lowrate of access to the banking sector in the countryremains a major problem, however. The banking systemincludes 18 credit institutions (against 22 in 2003), 16of which are banks (10 in 2003) and 2 financialinstitutions (5 in 2003). This fall in the number of inbanks is the result of the opening of the agriculturalfinance bank, the Banque pour le Financement del’Agriculture, and mergers and acquisitions between theSociété Générale de Financement et de Participationen Côte d’Ivoire and the Société Générale deFinancement par Crédit-Bail. The disappearance ofthree credit institutions since 2003 is due to thewithdrawal of the authorisation of the Fonds de Garantiedes Crédits aux PME and to the merger-acquisition ofAfribail-Côte d’Ivoire and the Compagnie Financièrede la Côte d’Ivoire by the Société Générale de Banqueen Côte d’Ivoire (SGBCI). Among the banks are elevencredit and general-banking institutions, one housingbank, two institutions specialised in SME financing,one bank specialised in agricultural financing and onenational investment bank (formerly the CaisseAutonome d’Amortissement [CAA], which managedthe public debt). The majority of financial institutionsare focused on plant and property leasing.

The Ivorian banking sector is quite concentrated:the four main institutions account for approximatelythree-fourths of the total net assets (excluding theBanque nationale d’investissement [BNI]). Ivorian

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credit institutions account for 31.3 per cent of allWAEMU bank balances, a share significantly lowerthan that of the Ivorian GDP in the regional economy(37 per cent). In 2005, the spotlight was to be onmicrofinance. Prior to the outbreak of the crisis, thedevelopment prospects of this sector were significant.In 2000, for example, the country counted 16microfinance institutions, offering a total of 287 pointsof service (for about 331 000 customers), compared with154 bank branches. The Bourse des Valeurs MobilièresRégionales (BVRM), located in Abidjan, offersalternative regional financing by enlarging the financialand banking market. This organisation sufferedenormously from the crisis, however, due to theprevalence of Ivorian companies on its books.

In the past three years, non-tax receipts– privatisation earnings – grew from 4.3 billion CFAfrancs in 2003 to 9.3 billion in 2004. Since 2002,these have involved only marginal public holdings,with the exception in 2004 of shares in the country’stwo largest banks, which were already subsidiaries ofFrench banks (Société Générale and BNP-Paribas).During these three years, the difference betweenprojected and actual privatisation earnings amountedto 26.5 billion CFA francs, or more than 50 per centon average for the period. This reflects theincompatibility of the privatisation processes with thetroubled period. The Ivorian state is still planning towithdraw from seven more companies in the comingyears. These include: the SICOGI (construction andland management company), the SOTRA (Abidjantransport company), the COTIVO (Ivorian cottoncompany), HEVEGO (hevea company in Go), theSIB (a banking organisation), a 51 per cent subsidiaryof the Crédit Lyonnais, the SIVAC (Ivorian slaughterand meat processing company) and the SIPEF(international palm plantation and finance company).Missing from this list of companies to be privatised isthe SIR (the oil refining company), which is the lasttruly attractive public holding remaining. It is in factthe leading Ivorian company in terms of its turnover,$803 million in 2003. Yet its sale was consideredcrucial by the World Bank for rebuilding the Ivorianenergy sector. An initial attempt at privatising the SIRwas abandoned in 1999 (it had been awarded to the

French company, Total, then cancelled by a courtjudgement). In 2003 and 2004, the company benefitedfrom new market conditions in oil and was able torealise highly profitable margins. Freed from pressurefrom international organisations (which suspendedoperations in Côte d’Ivoire due to the crisis), the localauthorities no longer intend to privatise the SIR, norin fact Petroci, a company regrouping public holdingsin oil and gas fields.

Transport Infrastructure

The inter-city road network in Côte d’Ivoirecomprises more than 80 000 km of roads, including6 500 km of paved roads. Urban roads account forabout 10 per cent of the inter-city network, or around7 000 km. The present value of this network is estimatedat more than 4 000 billion CFA francs. The dirt-roadnetwork counts 20 000 km of extremely deterioratedroads and 150 000 km of impassable roads, which areinterrupted at 523 points in 220 sections. The serviceof the network is generally very poor. The residual roadsurface and the width of the roads are so reduced thatthe average speed hovers around 35 km/hour. The roadsurface of the network, which was designed theoreticallyto last 15 years, is also seriously damaged. About 63 percent of the network (4 100 km of paved road) arebetween 15 and 32 years old and need to be rehabilitatedor reinforced. These repairs, estimated at410 billion CFA francs based on an average current costof 100 million CFA francs per kilometre, have becomevery urgent.

The country has a single railway line, which linksAbidjan to Ouagadougou in Burkina Faso. It stretchesover 1 156 km in Côte d’Ivoire and 518 km in BurkinaFaso and is marked off with 35 stations and 18 stops.The network is managed by the Société d’exploitationdes chemins de fer (Sitarail). A rail investment fund,the Fif, was set up with resources from the states andSitarail to ensure future financing.

Côte d’Ivoire has two deep-water ports, Abidjan andSan Pedro. The port of Abidjan (for its harbour zone)extends over 770 hectares and shelters 60 per cent ofthe country’s industries. It is the largest tuna port in

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Africa. It has 33 berths on approximately 6 km of quay,with a capacity to handle 60 commercial boats with anumber of specialised berths, a container terminal withfour berths and three heavy gantry cranes for containers.The total quay level surface area is 407 568 squaremetres, for 143 507 square metres of warehouses andhangars. A port expansion project was developed butcould not be launched because of the crisis. The portof San Pedro is equipped with two quays totalling 736metres. The 155-metre south quay has a 4 000-square-metre warehouse dock at the rear. The 581-metre westquay is equipped with two warehouse docks of 4 800and 5 000 square metres, a 250 tonnes/hoursubterranean pipe for pumping palm oil into the ships,a 150 tonnes/hour grain conveyor for unloading wheat,a total of 9 hectares of quay level surface and a cementberth. An extension of the San Pedro port is also plannedto the north of the current port to enable it to bolsterits industrial role.

Prior to the crisis, Côte d’Ivoire had 3 internationalairports (Abidjan, Bouaké and Yamoussoukro), 14regional airports (the main ones being Daloa, Korhogo,Man Odienné and San Pedro) and 27 airfields. All theairports were management by a public organisation, theAgence nationale de l’aviation civile et de la météorologie(ANAM), except for the activities carried out by theAgence pour la sécurité de la navigation aérienne enAfrique et à Madagascar (ASECNA) security agency.The Abidjan airport carries 90 per cent of the trafficand accounts for more than 95 per cent of the revenueof the sector. It is privately managed, following thesigning of a contract with AERIA, a company set upin association with the Chamber of Commerce ofMarseilles. Since 2002, air traffic has declined noticeably,and, with the exception of Abidjan, the airports haveundergone extreme deterioration.

Political and Social Context

For more than three years, Côte d’Ivoire has beendivided into the southern region, controlled by thegovernment, and the northern region, held by therebels. Despite some progress made in the nationalreconciliation process in 2005, the country remains

at a political deadlock. The President of South Africa,Thabo Mbeki, the most recent international mediatorto date, is attempting to advance the peace process.Among the notable changes to his credit is PresidentLaurent Gbagbo’s new stance with regard to AlassaneOuattara, the leader of the opposition Rassemblementdes Républicains de Côte d’Ivoire (RDR). Thepresident conceded to use his special powers to allowOuattara to be a presidential candidate, in contrastto the previous election in 2000. Ouattara returnedfrom his voluntary exile in February 2006. TheSecurity Council resolution 1633 of 21 October 2005,which ratified the African Union (AU) decision of6 October 2005, decided to maintain Laurent Gbagboas head of state for a period of twelve months. Itimposes upon him a prime minister with enlargedpowers, who is to lead the transition. His governmenthas the priority goals of disarmament, reunificationof the country and preparing the presidential electionof October 2006. Disarmament, which has beenpostponed several times, should affect some42 000 soldiers. The new government will not havean easy task. The rebels could first insist on thedisarmament of the pro-government militia beforedisarming themselves, while the G7, a coalition of fouropposition parties, is seeking to contest the nationalstatistics institute, Institut national de la statistique(INS) in its constitution of the electoral register.According to the G7, this responsibility belongs to theindependent electoral commission, the Commissionélectorale indépendante (CEI). Another prerequisitefor presidential elections is the restoration of publicadministration in the regions under the control of theForces Nouvelles. This is far from being achieved:despite the return of a few public servants (doctors,nurses and teachers for the most part) to the rebel zone,the resumption of administrative services is restrictedto a few towns close to the ceasefire line. The PretoriaAgreement of April 2005 recommended to the AUand to the United Nations (UN) Security Council toimpose appropriate sanctions on all parties that blockthe peace process. Resolution 1572 of the SecurityCouncil of 15 November 2004 had already authorisedtravel ban and asset freezing of any individual thatmight hinder the peace process. A confidential list ofthose who could be subject to these sanctions was

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even compiled by the UN. However, it was notfollowed through. South African mediation, largelysupported by the international community, wasextended in October 2005 (during the Addis Ababasummit, not attended by the President of Côte d’Ivoire)by the AU Security Council. On the front line, tensionrose in the west after the massacres near Duékoué inJune 2005. The region was subsequently placed undermilitary control. The town of Agboville was also thesite of an attack, which followed an assault on theAnyama police squad and police station, during whichnine people were killed by the assailants. Large stocksof arms were stolen. The January 2006 attack on twomilitary camps in Akouédo caused tensions in Abidjanto increase and cast doubt on the possibility of gradualpacification and return to peace.

The UN decided to deploy 850 additionalpeacekeeping soldiers to reinforce the UNOCI (UnitedNations Operation in Côte d’Ivoire) contingent of6 000 already in place. It also raised the possibility ofcalling on peacekeeping forces currently in Liberia andSierra Leone, and authorised the deployment of375 additional civil police (the contingent currentlycounts 725 police). UNOCI’s peacekeeping mandatewas extended to 24 January 2006. Among thoseenforcing the mandate are 4 000 French soldiers fromthe Force Licorne.

Health and education have suffered greatly from thecrisis. Since September 2002, hospitals and clinics inthe north have received no government funding. Themajority of labourers in this region have migratedsouth. According to the UN Population Fund, lifeexpectancy at birth for the 2000-05 period was 46 years.Infant mortality was 118.3 per 1 000. The World Bankputs the mortality rate for children under five years at191 per 1 000.

The social items of the government programmehave been mostly frozen by the crisis. These include,in particular, free school books for children, and accessto drinking water and health care for all. Plans foruniversal health insurance and to distribute antiretroviralmedicines to those affected by HIV/AIDS have also beenput on hold.

According to the Global Fund to Fight AIDS,Tuberculosis and Malaria, the crisis has resulted inthe displacement of around 800 000 people, bringingabout sexual promiscuity that could result in a strongrise in HIV/AIDS. Côte d’Ivoire is one of the countriesmost affected by the pandemic in West Africa, with7 per cent of its 16 million inhabitants carrying thevirus in 2003, according to UNAIDS. The infectionrate today is stated to have reached 9.5 per cent of thepopulation, but health workers estimate that this figuredoes not reflect what is a much more serious reality.To assess the true dimension of the phenomenon, itwould be necessary to perform an new assessment ofthe disease. At the end of 2003, 570 000 people(children and adults) were living with the virus, amongwhich there were 300 000 women from 15 to 49 yearsof age and 40 000 children under the age of 15. Thenumber of deaths was estimated at 47 000 in the sameyear, while 310 000 children had lost at least one oftheir parents to AIDS. In September 2004, thegovernment announced the first nationwide surveyon HIV/AIDS, but this project has remained in limbo.Again, the crisis is responsible for the delay and is alsoa major obstacle in the campaign. The goal of treating63 000 HIV-positive patients by end-2005 has becomeunrealistic. Several care units in the west have beendestroyed, and a number of health facilities have beenclosed in the north, where medical workers remainreluctant to go.

The crisis also paralysed national education, whichhas still not found its bearings. In 2005, success ratesin schools and universities were low. Several schools wereclosed in the rebel-controlled zones. The few institutionsthat strived to remain open did not function properlyand had to call on volunteers (about 4 500 in twoyears) to replace public teachers who had fled to thesouth. The University of Bouaké, totally sacked at thestart of the crisis, opened a temporary campus inAbidjan. While 12 000 students managed to flee thenorth, those remaining in Bouaké are deprived ofschooling. The Ministry of Higher Education askedUNOCI and the government of Japan to underwritethe reconstruction of the University of Bouaké,estimated at 7 billion CFA francs. The launch of thisproject stands in contrast to the political stalemate.

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Resuming economic and social activity after theconflict is proving difficult. In-depth evaluations toassess specific needs are necessary in order to implementappropriate programmes. The social priorities for 2006and 2007 should target food security, health, water andhygiene, protection, and education, with urgent aidfor the vulnerable. Efforts should also be made toredeploy teaching and medical staff in the north, andto encourage the return of displaced persons. Thiscannot take place without protection measures forthese persons. The government will also have to makea priority of rebuilding health centres and schools,and of supplying them with medicine and teaching

material. The development of agricultural activity,particularly the reconstitution of herds, should also bea key element in stabilising the living conditions of themost vulnerable parts of the population. Finally, thestate will also have to tackle rebuilding nationalcohesion and reducing inter-community and inter-ethnic tensions in a country that was actuallyaccustomed to cultural diversity. All Ivorians will haveto learn to live with each other again, for they arelinked together by a common historical destiny.Promoting cultural diversity is most likely to give riseto a strong civil society that will be able to build a societyfree of ethnocentrism and religious tension.

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côte d’ivoire · 30october2005 was postponed, and laurent gbagbo’s tenure as president of the...

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